Seven Things Your Organization Can Do to Save Money at Tax Time
This time of year, businesses and non-profits are gearing up for tax and audit season. Making sure all the accounting is correct and up-to-date, filing year-end tax forms, and getting W-2’s to all employees are just a few tasks that keep owners and managers stressing through January.
Once all the year-end bookkeeping tasks are done, it’s time to start thinking about filing your organization’s taxes. Here are seven things you can do to minimize your tax burden and save as much money as possible.
- Properly deduct start-up costs: Start-up costs (computers, equipment, rent) are certainly deductible; however, they cannot be deducted (or capitalized) until your first sale occurs – they are then deducted over 15 years. Check with your tax professional to find out the annual limits for your organization.
- Properly plan for taxes: Small businesses who choose to file as a C-Corporation may not realize their earned profits are being double taxed – once as corporate profit and once as shareholder income. This can be avoided by filing as an S-Corporation or an LLC. Make sure you research which legal structure works best for you.
- Keep accurate records: Bookkeeping for your business has become easier with mainstream software like QuickBooks and Sage Peachtree. These systems help you track your banking information, income and expenses, cash flow and payroll. Not only will accurate records help you minimize your taxes, it will help you manage your organization, save you money on the time it takes for your tax preparer to do your taxes, and may even help you get a loan. Organizations must keep all their records (paper and electronic) for seven years.
- Properly classify employees/contract labor: Correctly classifying your workers as Employees vs Contract Labor can save your business money by avoiding fines by the IRS. By asking yourself how, when, and where a person works, you can determine the correct classification to make sure you are compliant.
- Maximize depreciation: Trying to determine the best way to depreciate your capital assets can be tricky. There are various methods available, such as Straight-Line or MACRS, as well as Special Depreciation and 179 Deductions. Talk to your tax professional to determine which method is the most advantageous for your business.
- Keep funds separate: Many business structures, such as Corporations and LLC’s, are considered separate entities and finances should be strictly separated in order to protect your personal assets. All too often, small business owners don’t distinguish between a business and personal expenses; however, these expenses add up and could cost you money and trigger an audit.
- File on time: Filing your taxes or extensions on-time will keep your organization from incurring fines and interest fees. Federal tax filing due dates vary depending on how your business is structured:
- Limited Liability Corporation: Returns and K-1’s are due March 15, 2017.
- Partnerships and S-Corporation: Federal taxes are due March 15, 2017
- C- Corporation: Federal taxes are due April 17, 2017.
- 501(c)3 Non-Profits: 990 filings are due May 15, 2017.
By doing research and talking to your tax professional you can minimize your tax burden and risk and save money for your business or non-profit organization.